Estimated reading time: 5 minutes
A customer reports a lost or stolen bank card. So what happens next? Can they have a new card almost instantly – whether physical, digital or virtual? Welcome to the changing world of fast and simple card issuance…
It's a cliche to say that modern life is speeding up. But it's true. Consider the experience of watching a movie. 50 years ago, we waited weeks for a film to come to our town, then queued at a cinema to watch it. 30 years ago, we visited a video library and hoped a copy would still be available. 15 years ago, we waited for a DVD to arrive in the post. Now? We turn on the TV and click.
This rapid acceleration of speed and choice is, of course, all thanks to digitization. In an always-connected world, the way we access many products and services has changed.
This includes payments. Today, billions of people use debit or credit cards in lieu of cash as the default way to pay. And these cards come in multiple forms. For example, they can now be stored inside digital wallets on smartphones. This has led to the rose of ‘mobile branch’ concept, which offers 24/7 services, delivered anywhere and with the end-user in control.
Changes to the payments ecosystem have put the focus on modern card issuance. People want frictionless and stress-free journeys – and they want them fast. They don’t want to wait days for a new card. They want to be able to use an app to provision a digital card into a mobile wallet or order a replacement physical card.
Forward-looking financial institutions and their tech partners have responded to this demand by enabling the 'instant issuance' of cards. This has been made possible thanks to major innovations in the IT systems used to manage card life cycles and transactions.
Let’s look in more detail at the many factors fuelling the demand for better card issuance.
The rise of online commerce
E-commerce is ‘normal’ for billions of shoppers now. This has made consumers comfortable making ‘card not present’ payments. According to Morgan Stanley, global e-commerce sales accounted for 15 percent of total retail sales in the year before COVID-19 (2019). The number leapt to 22 percent by 2022. However the analyst believes the market has plenty of room to grow and could increase from $3.3 trillion today to $5.4 trillion in 2026.
In fact, the online habit is near-ubiquitous in some countries. Indeed, according to McKinsey’s 2022 Digital Payments Consumer Survey, nearly nine in ten Americans now use some form of digital payment, including online shopping, in-app payment and peer-to-peer (P2P) transfers.
Move to cashless
Contactless 'tap to pay' cards were first introduced in the 2000s, but it took a while for the public to accept them. Adoption was rising steadily in the late 2010s, but COVID really scaled the uptake. During the pandemic, consumers switched not just for convenience, but also for hygiene. Meanwhile regulators responded by upping the limit on transaction amounts.
People switched en masse. A study by Juniper Research has found that the value of contactless payment transactions hit $4.6 trillion in 2022. It expects the total to reach $10 trillion by 2027.
There's been a similar explosion of uptake on the acceptance side. In-store mobile point of sale (POS) has skyrocketed in the last five years, as even micro-merchants started to take card payments with small mobile readers.
This trend looks set to continue thanks to another new tech innovation: softPOS. This allows retailers to use a phone rather than a dedicated device to receive a card payment.
When Apple launched its Apple Pay feature in 2014, it triggered a turning point for the global card industry. This was the moment at which the mass market became aware of – and began using – entirely virtual payment cards stored inside mobile wallets.
Today, nearly a decade after its launch, Apple Pay and other services like it are firmly in the mainstream. In fact, Apple Pay contributes a substantial portion of the $20.77 billion Apple derives from 'services' every quarter.
But the mobile card is only one version of the digital product. Consumers now store their cards in watches and jewellery too. They can also access virtual cards in online transactions.
Cards comprise more features
It look decades for cards to offer the ability to make a payment with a tap. But in recent years the innovations have proliferated. Today's issuers routinely offer new features that make cards more useful than ever.
Consider voice tech. Some banks are now trialling a voice payment card pitched at sight-impaired customers. These cards vocalize all the steps of a transaction to a Bluetooth-enabled mobile app.
Another breakthrough is the biometrically-enhanced card. In 2021 the first card was launched with a fingerprint sensor. The extra layer of authentication makes the product highly secure, and allows the user to make a high value payment with a frictionless UX.
And then there’s sustainability. Some card manufacturers now offer alternatives to 'virgin' plastic such as the Polylactic acid (PLA) card, which is made with renewable bio-sourced resources such as corn. Others are investing in recycled cards. The Ocean Plastic card is made using 70 percent plastic cleared from coastal areas.
More regulations and security
The rise in card use – and particularly in card-not-present use – has triggered a regrettable rise in fraud. According to the Federal Trade Commission, US consumers reported losing more than $5.8 billion to fraud in 2021, an increase of more than 70 percent over the previous year.
Banks need to be aware of the risks involved in issuing cards. They need to ensure they share credentials directly with the customer, and that credentials are safely stored within a mobile wallet or app. They must also abide by the rules put in place by regulators to maximise security and privacy. These include the EU's PSD2, which lets a user authenticate their identity with the biometric features of the smartphone.
Banks need to modernise their card issuance approach – but what are the challenges?
The analysis above reflects the huge changes in card usage, and in the nature of cards themselves. In this new normal, lengthy and clunky legacy card issuance programmes are not fit for purpose.
Instead, banks need to make instant issuance (of physical and virtual cards) the new baseline in customer service. Those that do so will increase the number of card holders, boost card transactions and reduce fraud.
To summarise, they need to offer four services:
Legacy physical card issuance
For all the popularity of virtual cards, people still like plastic. And, as we have reported, there is plenty of innovation going on in the physical space. Banks should not overlook this. They need to be able to issue fully-featured physical cards quickly, and also make it easy to replicate and digitise them within mobile wallets too.
Instant in-branch physical card issuance
On-the-spot card issuance is pretty normal now. Typically, a customer will call to cancel a card and then take possession of a new printed replacement almost immediately. For banks with a strong branch presence, it can be a competitive advantage. And it is proven to boost activation and usage. The immediate activation rate for instant issuance cards is 82 percent. That compares with 50 percent for a conventionally issued card.
Instant digitization of existing physical cards
Customers love paying by phone or watch, so it's important to let them digitise their existing physical cards with minimum fuss. According to research by OnDot, cards which are issued to digital wallets are nearly 100 percent activated and 70 percent are used within the five days
Instant digital-first creation of virtual cards
In terms of card issuance, mobile banking offers the ultimate in convenience. A customer needing a new card can complete an application process in the app and then receive their virtual card in real-time. And these cards can so more than just pay. They can support spending trackers, alerts and more.
Card issuance: the orchestration challenge
The pressures is on banks to move towards the instant issuance of physical, digital and virtual cards. Sounds simple. But a modern card issuance program requires a huge amount of orchestration behind the scenes. It has to connect new platforms to existing infrastructure. It has to orchestrate internal banking components such as:
• Card management systems
• Account management/core banking systems
• Payment switch
• Clearing and settlement
• Custom development modules
So, what's needed for a bank's developers to build a robust and effective issuance platform? What do developers need to make issuance fast and frictionless? Here are four essentials:
• Simple workable APIs
• Easy connectivity to payment networks
• The ability to orchestrate the card management stack
• The ability to meet PCI DSS compliance across the infrastructure
Third parties can help
For banks that lack the resources to develop their own modernised card issuance programmes, a number of third party specialists are standing by to help.
Companies such as Thales, which offers a card-issuing platform called D1, can build programs that precisely match the bank's preferred use cases.
The D1 SDK integrates all card-issuing resources for tokenization, HCE, and card personalization with additional resources such as SCA (Strong Customer Authentication) and banking core systems such as CMS (Card Management System).
This gives banks the ability to support real-time card issuance, activation, transactions management, account management, and fraud management. But it also ensures they can comply with PCI DSS for all data flows, display, storage and life cycle management.
Your next move
The way we shop and pay in the 2020s is unrecognisable from the world of just 20 years ago. E-commerce volumes are rivalling physical retail. Cash is dying out. These changes place the bank card at the center of people’s lives – and make card issuance a priority for banks. Happily, today’s financial institutions have plenty of options to make the process flexible, frictionless and fast.